Direct Costs vs. Indirect Costs
What’s the Difference? Why Does it Matter? The Farmcolony Board of Directors has been grappling recently with how to apply direct and indirect costs of farm operations. What's the difference between direct and indirect costs? Why does it matter?The main difference between direct vs. indirect cost is that direct costs are costs that can be directly attributed to a specific product, service, or project while indirect costs are shared expenses that support overall business operations that cannot be linked to a single item.Direct costs: These are tied to individual activities. For example, if you’re a florist, the roses and tulips purchased for a wedding arrangement are direct costs.Indirect costs: Indirect costs, or overhead, are shared expenses supporting overall operations such as rent and utilities that don’t connect to any…